The question is what greater volatility means for investors.
It has become a golden decade, although the FTSE 100 has lagged other world indices. Tim Buckley, the boss of passive funds giant Vanguard, told the weekend papers that returns would in all likelihood be smaller because valuations remain stretched.
That comes as no surprise given the economic stimulus used in the years after the financial crisis will no longer be around to plump up equity prices.
What about the index trackers which have made hay while markets have continued their inexorable rise?
Companies such as Vanguard have grown huge on the idea that trying to beat the market is a fool’s errand. Just follow it instead. Ironically, whenever the market sees choppy conditions in relation to individual stocks it is put down to computer-led trading strategies that act like an echo chamber to accentuate the good or the bad. Witness how oversold stocks such as Centrica became last year because automated selling interpreted a problem as a crisis.
Now, with the market “corrected” and likely to fall or track sideways, it will be interesting to see how the machines react.
For the past five years, passive funds have garnered billions from investors focused on cost because they were assured of returns. It forced widespread consolidation in the asset management industry, including Aberdeen Asset Management’s tie-up with Standard Life and Henderson’s combination with Janus.
Many of these firms are in rude health, such as Jupiter Fund Management which began the year with a record £50 billion under management.
Their defence of fatter fees has always been: judge us on our performance. Veteran fund managers including Richard Buxton at Old Mutual were cock-a-hoop last week that the robot rally had taken on some very human characteristics.
Stock pickers who risked being put out to grass suddenly have an opportunity to prove their worth.
